Michael Eisner, who joined Disney in 1984, served as the prince that awoke the dormant giant of animation and infused new life as well as new strategies into the company. Along with Frank Wells and Jeffrey Katzenberg, the trio successfully rebuilt the magic kingdom of Disney with Eisner’s profit multiplier business model and the application of synergy group. With Eisner’s business model, Disney’s creative content was transformed and repackaged in various forms which led to the expansion of profits in a wide range of consumer product domains. Repacking and cross-marketing did not only help leverage “the value of one content source across the company’s many divisions” but also allow the creative content to be utilized numerous times to increase profits for shareholders (Harvard Business School, 1998, p. 2). Accordingly, branded products that originated from the creative content became one of the major channels for revenue for the company. In the end, the result of their efforts was the creation of a brand and a self-sufficient entertainment empire that had the privileges of ignoring vendors from the outside.
Before Katzenberg’s replacement, the trio worked closely to regain Disney’s dominance in animation and rebuild the magic kingdom of Disney by producing blockbuster films, managing theme parks, licensing merchandise to partner companies and signing off a deal with the distribution unit of Warner Brothers to market their movies internationally and expand their own distribution unit, Buena Vista, for the increase of home video sales. Wells and Eisner redirected Disney’s focus and commitment to animated films so that the characters in these films could be repackaged and recycled in various fashion while Katzenberg invested plentiful of money in animation technology to rebuild the animation department. Their goal was to transform Disney into not only a content creator but also a content distributor through the manipulation of internal and external synergies.
The Synergy Group was established under Eisner’s guidance and served as a linkage to provide close collaboration between divisions to leverage film investments and costs. The main concept was to cross-promote and transform popular creative content products into new channels of profits. As a result, how divisions collaborated with one another became extremely critical even before a film’s release. For example, prior to a film’s official release, creators from Disney’s Animation division had to present to Disney’s Consumer Products, Home Video, and Theme Park divisions about the upcoming film and elaborate as well as demonstrate characters and themes from the film for potential product option brainstorming. In addition, international corporate gatherings would be held every year for representatives from all divisions and countries to present their cross-divisional initiatives and plans to one another as well as the company’s top management. On account of these meetings, each division was forced to acknowledge what other divisions were attempting to achieve as they worked aggressively together on a year-round basis and form a close relationship among divisions to exploit every potential business opportunities in different realm.
The other strategy that Eisner employed to reinforce internal synergies was the award system. Eisner had an incredible memory for performance evaluation, recalling who in the company did or did not play by “the rules of synergy game” (Harvard Business School, 1998, p. 2). With the award system, divisions acknowledged the fact that only when they work closely together will they expand their market sales and increase the opportunities for awards. To them, the success relied heavily on team work. Accordingly, when releasing the Lion King videos in Europe, the Home Video division of Disney joined forces with its Consumer Products division in Europe to “assure access to shelf space in retail stores” (Harvard Business School, 1998, p. 2).
In addition, Disney’s cross-divisional application of its creative content in the domain of movie and video distribution, ancillary licensed merchandise markets, broadcasting and cable as well as theme parks and resorts also contributed significantly to the success of Disney, especially its blockbuster the Lion King. From the creative content perspective, the Lion King possessed all the essential elements for success. With its original story line, adult themes and plots that everyone could relate to, this creative content hit the big screen with a wild success. Moreover, audience’s frenzy for the movie continued to upsurge its home video hit the stores. Existing copyrights of the film allowed Disney to reuse the material over and over again to make the best of it. For instance, the movie was re-released again in theaters later that year, a Lion King Sing-Along-Songs video was release a year later and the home videos that were released through Disney’s own distribution unit, Buena Vista, had sold worldwide with licensed merchandise partners and retailers offering rebates or special discount on the film. Furthermore, television programs inspired by the movie were also developed and aired on the Disney Channel. Accordingly, Disney’s internal synergy of marrying its creative content to multiple channels of distribution greatly leveraged the company’s investment in the movie and actually profited from it.
On top of video distribution, ancillary merchandise selling served as the perfect application of creative content and generated a significant amount of revenue. Disney marketed its movie-related products and approached the ancillary market from two directions, by way of its own retail stores and merchandise licensing arrangements. With its own retail outlets and Disney On-Line, Disney was able to reuse the content to sale all types of merchandise without mediators exploiting the profits in the process. The peripheral products ranging from character toys, clothes, key chains, cups, books to video games. Also, following the success of the movie as well as the featuring of Elton John and Tim Rice, audio products such as award-winning soundtracks and read-along cassettes effortlessly served the purpose of cross-promotion and further brought in profits.
Disney also reached into audience’s everyday life from diverse aspects, ranging from toys to food products. Regarding the case of the Lion King, the Consumer Products division of Disney licensed rights to Mattel for toys, Nestle, Coke and some bakery stores for food products, Burger King for restaurant chains, IBM for interactive programs. Through cross-merchandising with its licensed business partners, Disney shared its brand name and consumer information with major retailers as the retailers shared their perspectives on the marketplace in return. All these movie tie-in involvements assisted both sides to gain profits while serving as platforms for movie promotions.
Moreover, another factor that contributed to the synergy of creative content in broadcasting and cable is Disney’s acquisition of ABC television and radio networks as well as the ownership of the Disney Channel. With existing ABC, Disney did not only gain immediate access to television networking but also provide its films a safety net as well as a greater opportunity for cross-promotion and merchandising. Under the circumstances, hit movies like the Lion King would bring in extra profits for the company while those non-box-office movies might become profitable under the safety net.
Lastly, another major source of revenue for Disney at the time was its theme parks and resorts. Disney World, Disneyland, and Tokyo Disneyland helped promote the animated movies through costumed characters, character parades, and live stage shows like the Legend of the Lion King Show in the parks. Also, collaborations between Disney’s Creative Entertainment division and Imagineering division made the lion king attraction ride come true. One way or another, the show and ride drew park-goers’ attention to the movie itself and fulfilled its promotional function while offering a fun and enjoyable experience.
Resulting from above, Disney gained more profits from vertical integration and synergies than having each division working separately. In this era of globalization and collaboration, cross-selling, cross-promotion, cross-collaboration and a sense of one’s own culture as well as other people’s culture are the essentials for survival and growth in this competitive global market. Synergies of all kinds are required. As a result, on one hand, Disney’s animation serves to keep track of America’s consciousness and define that “sense of Americaness” (Harvard Business School, 1998, p. 7). On the other hand, its non-US divisions have regional synergy groups responsible for local coordination for consumer products and distribution of films, home videos, and television programs. However, how we push the application of synergies to another level without losing that balanced relationship among divisions, countries and cultures has to be taken into serious consideration for all these media empires of the next century.